Equity Mutual Funds back in favour among retail investors

Industry insiders say that both HNIs and retail investors have come into the market and are routing their investments into equity schemes.

Equity mutual funds are once again finding favour among individual investors, who have made record investments in these schemes, marking a change from the lack of interest witnessed from this segment for several years.

In the first three months of FY15, the mutual fund industry witnessed a net inflow of Rs 9,968 crore into equity schemes — the highest in any quarter over the last six financial years.

While the net inflow in May stood at a three-year high of Rs 2,452 crore, the Rs 7,309 crore for June is the highest monthly tally in equity schemes since January 2008, when the markets were trading at all-time high levels. However, in the year ended March 2008, the net inflow stood at over Rs 40,700 crore.

Industry insiders say that both high net worth individuals (HNIs) and retail investors have come into the market and are routing their investments into equity schemes.

“Most of the money that we received over the last two months is from informed investors (80 per cent from HNIs and 20 per cent from retail investors) who can take their own decision but going forward we will have to convert the gold, real estate and fixed deposit investors to come to equities and that will take some time,” said Abhay Aima, group head-equities & PBG and third party products at HDFC Bank.

In the month of June, HDFC Bank collected four times of what it had mobilised on an average in equity schemes over the last few months and Aima said that the June trend continues to remain strong even in the month of July.

With the rise in sentiments and markets following the expectation of BJP led coalition coming to power, there has been a shift in investor’s behaviour towards equity investment. As the stock markets rose and money flowed into equity schemes, the assets under management of the equity mutual funds have gone up from Rs 1,66,560 crore in March 2014 to Rs 2,10,794 crore in June 2014. In the same period the Aggregate Aum of the industry has risen by 18 per cent from Rs 8,25,240 crore to Rs 9,74,715 crore.

The percentage rise in equity Aum for the industry has also far exceeded the Sensex and BSE 100 growth thereby suggesting that not only has the performance of equity schemes of mutual funds have surpassed the benchmarks but also that there has been a net inflow of funds into equity schemes.

In the same period between April and June, the Sensex rose by 13.5 per cent while the BSE 100 index appreciated by 15.3 per cent. The mid-cap and the small-cap indices had a stronger rally and they jumped by 30 and 41 per cent respectively in the same period.